Gov. Rick Snyder, a Republican, told reporters Friday morningthat "There's probably no city that's more financiallychallenged in the entire United States” than Detroit. Thegovernor declared the crisis a financial emergency and started topave the way for an emergency manager to intervene and take controlof the city’s ledger.
“Detroit can no longer afford to wait for a new wayforward,” read a brochure handed out to audience members duringFriday’s announcement. “An Emergency Financial Manager can morequickly and efficiently reform the finances in the city and stopthe cycle of overspending and one-time fixes.”
Even with a bankruptcy filing a longtime looming, the city ofDetroit has tried relentlessly in recent years to pick itself upout of the red and find a way to reverse a downward spiral that hasseemed to only intensify amid growing cases of other localeconomies crumbling across the United States. Such attempts havebeen futile, though, with seemingly no solution existing for thecity’s woes: an earlier study determined the city faces a $327million budget deficit and more than $14 billion in long-term debtand persistent cash flow problems. Then on Friday, the governorsaid, "I believe it's appropriateto declare the city of Detroit in financial emergency.”
Gov. Snyder made his remarks today only two weeks after astate-appointed review team conducted a study that concluded withthe determination that "no satisfactory plan exists to resolve aserious financial problem." Now the city’s mayor, David Bing,has 10 days to respond. From there, reports the Associated Press,Snyder could either revoke his decision or appoint an emergencymanager.
Doug Bernstein, a managing partner of the Banking, Bankruptcyand Creditors' Rights Practice Group for Michigan’s Plunkett Cooneylaw firm, tells the AP that filing for bankruptcy would be the nextlikely, but not necessarily guaranteed, step.
"Is it imminent? Well not tomorrow," he said. "Youneed to give a financial manager the opportunity to formulate aplan and let the plan have a chance to succeed or fail. It may notavoid a bankruptcy, but you don't need to do a bankruptcytoday."
On his part, Mayor Bing issued a statement seeming to suggest hewas open to doing whatever necessary to save the faltering citythat was once America’s hub in regards to the booming automobileindustry and rhythm-and-blues music.
"I think we have to learn to make the best out of a badsituation," the mayor told the AP. "The state and the citywill have to work together to get us out of this."
In 2011, the capital city of Pennsylvania — Harrisburg — voted to file for bankruptcy aftera failed garbage-to-energy conversation program put the town morethan $300 million in debt. The nearby city of Scranton quite closeto soon following, and by this past summer three cities in California were all forced to do thesame.
Since 2000, the city of Detroit has lost roughly 25 percent ofits entire population. The number of Detroit residents today isequivalent to half of the city’s population in the year 1950.
